Financial transactions tax is a new idea for a country that needs them

Financial transactions tax is a new idea for a country that needs them

Date Published: 01/13/2009

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Although our focus is on Minnesota, balancing public budgets is a universal issue right now, and truly fresh thinking about solutions is in short supply.

Writing about the federal budget, New York Times columnist Bob Herbert could be describing the befogged mania of anyone who believes we can spend without taxing or fill gaping budget holes without more revenue.

Budget deficits and the national debt are streaking toward the moon. And the only remedy anyone has come up with for fending off Great Depression II has been deficit spending on a scale reminiscent of World War II.

However, Herbert notes, there's one new idea that just might raise needed tax dollars progressively, while dampening some of the speculation that has helped contribute to the world financial crisis. It's a financial transactions tax proposed by economist Dean Baker of the Center for Economic and Policy Research [Download pdf].

A small transaction fee of up to 0.25 percent on the sale or transfer of stocks, bonds and other financial instruments could raise in the vicinity of $100 billion annually, according to Baker. The expense would be minor for the average investor or buy-and hold-retiree, but it would levy a higher cost on speculators who treat the markets "like a casino."